Today, I wanted to share some of my homework done for those of us who might not want to FIRE in Australia. The number one priority is still to determine how much you need (and some calc are here to help you). As they are some many advantages to retire overseas, or you might just want to be closer to family (as for me in Europe), here is a little guide on what to take into consideration to retire overseas:
The challenges (and they are many!) and the risks:
If you live, work and retire in Australia, your tax rate will most likely be low. Superannuation benefits will free of charge, your house is not taken into account for the asset part for the calculation of your pension.
If you decide to live overseas permanently, you could become non-resident for tax purposes potentially and therefore get taxed on a higher rate.
My advice is to check on the worst case scenario (non-resident tax rate), even if they are some other possibilities that I will name later on. It is important to check if there is a tax treaty agreement between Australia and the country you would like to migrate to avoid paying taxes twice.
Other taxes such as inheritance taxes need to take into consideration for your long term plan. No tax on real estate in Australia but 60% of the value of the property in France, you need to take these aspects in balance and align them to your long term projects, in that case, your legacy for your children.
To be get access to pension in Australia, you need to have worked and have been a citizen for 25 years. So no pension for me here since I have arrived only in 2009 and will most likely leave Australia before we hit the 25 year mark. But the issue is that there is no pension for us either in France as we have worked for less than 10 years there…
So you can check the details on the country you would to retire in.
My advice is not to count on pension at all and focus to create this passive income to retire early.
- Exchange rates:
As your project matures and you check on the best places to put your investments, one need to consider the is the exchange rate. If you have invested into real estate and LICs only in Australia, you might become highly dependent on the exchange rate of your investments.
Once again, as it can be a risk, I believe you can turn this as an advantage if you find a type of investment that can move with your location: more details on this below…
- Interactive brokers:
I have discovered this wonder where you can basically adapt your account and move it with to where you live. If you were to continue investing in USD as I do nowadays, and decide to live in Portugal during your early retirement as an example, you would have taxes withdrawn directly from your account in USD and pay no taxes on top of this.
I’m a strong advocate for diversification and this would be the same if you were to invest in EUR, AUD or JPY, to get more exposure to different markets and still get tax benefits.
- A new culture, and a cheaper everything:
Possibility might become endless if you get into Europe or Asia where revenue needed to live per month is much lower. Countries such as Portugal will give you a tax free environment for 10 years.
This article has no intention of summarizing this potentially complex decision but rather start opening our mind to other retirement opportunities… As you usual, the above is my own experience and my own research and you should seek financial advice according to your own personal circumstances.
What are your thoughts on retiring overseas?